Production Resumes in Kazakhstan, Caspian Reports

CALGARY, ALBERTA--(Marketwire - June 21, 2011) - On June 15, oil production was reinstated at the East Zhagabulak field in Kazakhstan, Caspian Energy (TSX:CEK) Chairman and CEO William Ramsay said.

Production wells

On the first day, oil flowed from East Zhagabulak (EZ) well #301 at a rate of 370 barrels per day under reservoir pressure. Over the course of the subsequent 6 days, well 301 performed most satisfactorily. The daily flow rate reached 571 b/d during the test. Well productivity benefits from high incidence of gas which has accumulated during the long period of shutdown. So far, the water content remains low. The performance of this well will be closely monitored to determine the appropriate time to conduct acidization of the well and the most opportune time to install a submersible pump. Following a workover of this nature, well 301 should produce at a rate of approximately 700 barrels per day.

On June 16, well 213 was opened and flowed for 15 hours, up to the time of reporting at midnight. Well 213 recorded 53 barrels of oil, but also a substantial quantity of water, as was expected. "Well 213 was unable to sustain flow under natural pressure. The workover rig is currently being mobilized and a new submersible pump will be installed. Further work will be undertaken to determine the location of the water intrusion, and perform remedial action. Following this workover it is expected that well 213 could produce at a rate equivalent to 300 barrels per day," Ramsay said.

Ramsay said that total production from the two producing wells in the East Zhagabulak field could exceed 800 barrels per day within the next month. The oil produced continues to be trucked to CaspieNeft TME's nearby facility for processing. "For a company of our relative size, the return to production, more important, to these levels of production are significant and ensures that APC (the Company's Kazakh subsidiary) has a healthy cash flow," said Ramsay.

Production at East Zhagabulak has been shut in since January 1, 2011 due to a combination of regulatory and technical issues. The pump at EZ #213 had failed and EZ #301 was shut in due to newly proclaimed gas flaring limits. Upon receipt of the flaring permit and, more recently, the permit for emissions into the environment, APC was able to re-commence production from the field.

Exploration wells

"This is the latest of several important steps that Caspian has made in recent weeks that have added up to a transformation of the Company's fortunes," Ramsay said. "We have a new partner with cash to fund exploration. Not only are we returning our two discovery wells in East Zhagabulak to full production, but we also have an exploration program under way with two rigs moving to drilling targets in the East Zhagabulak and Sakramabas areas of the North Block." These rigs are expected to be on site by the middle of July.

Ramsay said the new East Zhagabulak #308 target is a stepout on the same trend as the two producing wells. He said the Sakramabas #316 target has been identified from seismic data indicating potential for a high-porosity carbonate reef structure that is on trend with discoveries by near neighbors in the region. The Company believes that the prospect has significant potential. A further announcement will be made regarding these new two wells in due course.

Calgary-based Caspian currently owns 50 per cent of Aral Petroleum, the operating entity in Kazakhstan. Aral holds a 25-year production contract for East Zhagabulak and an exploration contract for the wider North Block property, an area of some 1,549 square kilometers that includes East Zhagabulak, portions of the Sakramabas trend and several other prospective sites. Under terms of a new partnership arrangement, Asia Sixth Energy of China has purchased 50 per cent of Aral from Caspian's original partner, Azden Management, and will soon acquire 10 per cent of Aral from Caspian. Aral will then be owned 60 per cent by Asia Sixth and 40 per cent by Caspian.

Background

Caspian is an oil and gas exploration and development company, operating in Kazakhstan where it has a number of targets in the highly prospective Aktobe Oblast of Western Kazakhstan. The Company holds an exclusive licence, which entitles it to explore and develop certain oil and gas properties known as the "North Block," an area of 1,549 square km, and a production contract for the area known as "East Zhagabulak," through its interest in Aral.

Cautionary Note:

Forward Looking Statements – Certain information set forth in this news release may contain forward-looking statements that involve substantial known and unknown risks and uncertainties. These forward-looking statements are subject to numerous risks and uncertainties, certain of which are beyond the control of Caspian, including, but not limited to the satisfaction of all conditions precedent to the sale by Caspian of a 10% interest in Aral, including the ability of the Purchaser to meet its obligations under the foundation agreement to secure US$80 million in debt financing for Aral, and the limited remedies available to the Company in the event of any such failure of the Purchaser, the impact of general economic conditions, industry conditions, currency fluctuations, and dependence upon regulatory approvals. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements.